Elliot Fisher, MD, of Dartmouth Medical School notes that virtual organizations consist of the various physicians associated with local acute care hospitals. As Fisher notes, these physicians are either directly affiliated with such hospitals through their inpatient work or through the care patterns of the patients they serve. Fisher refers to these multispecialty group practices that are bunched around local hospitals as an “extended hospital medical staff.” He argues that improving quality and lowering cost should be realized by fostering greater accountability on the part of this “extended medical staff.”
In a recent Urban Institute paper on ACOs by Kelly Devers and Robert Berenson the authors point to three essential characteristics of ACOs, as follows:^a

• The ability to provide and manage with patients the continuum of care across different institutional settings, including at least ambulatory and inpatient hospital care and possibly post acute care.
• The capability of prospectively planning budgets and resource needs.
• Sufficient size to support comprehensive, valid, and reliable performance measurement.

States are leveraging their healthcare purchasing power, including coverage for Medicaid, SPAP, ADAP, and SCHIP members and state employees, to support new ACO payment and contracting models. Through existing waivers and new opportunities in the Affordable Care Act, states can join with Medicare in their ACO development efforts. Suppliers need to consider how products should be bundled and benchmarked for pay-for-performance reimbursement, and then communicate with state agencies and legislatures the relevant quality measures for specific patient populations and medical conditions.
States can lead in the design of accountability measures of business processes and training through the adoption of statewide reporting requirements. States have provided leadership to enact systems for tracking and comparing cost and quality, a critical component of ACOs. Suppliers should work with states to discuss valuations of the costs and benefits of patient mixes and desired outcomes.

With recent funding the American Recovery and Reinvestment Act of 2009, states are at the forefront of health information technology (health IT) and health information exchange development. States are providing leadership and specific funding to develop new data capabilities. In particular, states are developing multipayer databases to assist in the collection and analysis of healthcare data across payers.

^a Kelly Devers and Robert Berenson, “Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality Quandaries?” Urban Institute (October 2009); available from Internet: www.urban.org/publications/411975.html.